Worstall on Wednesday That Elon Musk is a decamillionaire is true. That he's a great salesman is also true. But to whom is he selling, and what is it that he sells so well?
There's a very reasonable argument that what he's actually good at is selling to bureaucrats what bureaucrats want to buy with our money. And while that's obviously a useful technical skill, it's not entirely obvious that it's all that good a deal for us.
To believe that it is, you have to believe that bureaucrats do indeed spend our money on what is good for us.
OK, agreed, there are actually political parties that run on that platform, but it's not something that is likely to get a respectful hearing down at the Dog and Duck.
Los Angeles entrepreneur Elon Musk has built a multi-billion-dollar fortune running companies that make electric cars, sell solar panels and launch rockets into space. And he's built those companies with the help of billions in government subsidies.
This week, the LA Times has done us all something of a favour by totting up how much Musk and his companies have got from the various tax pots lying around the political terrain — and it's billions!.
Tesla Motors, SolarCity Corp and Space Exploration Technologies – known as SpaceX – together have benefited from an estimated $4.9bn in government support, according to the data compiled. The figure underscores a common theme running through his emerging empire: a public-private financing model underpinning long-shot startups.
It's not obvious that this is a bad idea: those tax breaks are put in place precisely to tempt people into doing things that would not make commercial sense without those breaks.
They really are incentives to do things not sensible at market prices in order to gain some other payoff. Say, subsidise the installation of solar panels in order to create a market of size, allowing volume production to bring costs down to something that works at market prices.
It's not an argument I agree with but it's a respectable enough one on its own terms.
Other subsidies are perhaps less defendable. Playing off tax jurisdictions in order to gain maximum tax benefits is an obvious strategy, but the value of it to the country as a whole is less obvious.
There's three major points here. The first is that Musk's businesses – SolarCity, Tesla and SpaceX – all follow that same strategy. In fact, it's the unifying feature of the three businesses. Noting what tax incentives are available and then designing a plan to go get them might be unkind, but supportable.
Again, this might not in itself be bad: those incentives are there to try to get people to do these things. But if three out of three businesses are following the one strategy, then you might think this is the strategy, rather than, say, making better solar cells, better rockets or better cars.
The second is the sheer scale of it all. Have no doubt that $4.9bn is a serious chunk of change. Yes, this does include the rebates that people get on buying an EV, the grants to install solar panels and all, and that's not money that flows directly to the companies. But there is an indirect flow: people wouldn't be buying these things without those cheques.
And the third is that, well, such subsidies aren't going to last forever. The EV subsidies are limited to 200,000 cars from any one manufacturer.
Tesla's already halfway to that limit. Solar cells are – well, we keep being told they are – about to be cost competitive with the grid. So subsidies are obviously going to start falling.
How well are those companies going to keep doing after the subsidy flood dries up? The current betting has to be that they'll do just fine, and that Musk has managed to get them over the hump into profitable mass production by using those subsidies as they were intended.
That's what the various share prices indicate, after all. But, umm, everyone sure about this?
Musk is obviously good at selling something. But it's not entirely clear that it's us, the consumers, that he's so good at selling to. It may well be that what he's really good at is noting what the bureaucrats and the politicians want, seeing how they've set up the incentives to get what they desire, then designing a company to suck in those subsidies they're offering.
And then selling that idea and those companies back to the bureaucracies that write the cheques.
You can't blame him, obviously. If it's raining free money, then why not collect some? But it is possible to have a vague feeling that this isn't quite how red-in-tooth-and-claw capitalism is supposed to work. ®